Transport and logistics segment likely to report net loss in 2020
KUALA LUMPUR: The transport and logistics sector has been projected to report a net loss in 2020E, Affin Hwang Investment Bank Bhd (AffinHwang Capital) observed after hosting five transport and logistics companies at Affin Hwang’s Transport & Logistics Virtual Conference.
Thesec companies included Malaysia Airports Holdings Bhd (MAHB), Westports Holdings Bhd (Westports), MMC Corporation Bhd (MMC), Pos Malaysia Bhd (Pos) and GD Express Carrier Bhd (GDEX).
“Broadly speaking, transport and logistics companies have observed lower business activity in April-May 2020 (except parcel volume),” AffinHwang Capital recapped.
“We concur with the corporates’ view that business volume will recover (from the low) in June or the second half of 2020 (2H20), but may not return to 2019 levels in 2H20 or 2021.”
All in, AffinHwang Capital highlighted that 2020 has been an unprecedentedly challenging year for the aviation industry.
The research firm expected both AirAsia Group Bhd (AirAsia) and MAHB to report substantial losses in 2020 due to lower passenger movement arising from cautious sentiment, the closure of borders and movement restrictions during the Movement Control Order (MCO) or Conditional MCO (CMCO) period.
“We continue to avoid the aviation segment due to the difficult business environment where travel is currently curtailed by the closure of borders.
“While we expect a gradual relaxation in cross-border travels in the coming months, the recovery in passenger traffic may be slow due to concerns over contracting the Covid-19 virus and weakened business or consumer spending.”
Elsewhere, AffinHwang Capital was neutral on Westports.
“The slower regional economic activities should affect Westport’s container volumes and hence, weaken its 2020E profitability.
That said, the research firm opined that the decline in business volume should not be as severe and Westports has a robust balance sheet to weather the downturn.
As for the postage or courier segment, Affin Hwang Capital noted that stiff competition may continue to affect profit margins.
“While the spike in parcel volume may lift the couriers’ near-term earnings, stiff competition may continue to suppress their long-term profit margins.”
All in, the research firm forecasted the transport and logistics sector to report a net loss in 2020E, before returning to profitability in 2021E.